Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 3- Why pumping more money into the economy at such point is unlikely to kickstart it?
Context
On Tuesday, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) convened for an emergency meeting, ahead of schedule, to discuss its response to the economic challenges posed by the Covid-19 outbreak.
Bond market reaction to the RBI announcement
- The MPC deliberated for three full days, but its decision would most probably have been sealed right at the onset.
- For that day, the Indian bond market saw no trades in the first twenty minutes.
- Fear and uncertainty in the market: The gap between the asking price and bids was so wide that the first trade for the day took place at 9:33 am. Gripped by uncertainty and fear about the future following the outbreak, the market had frozen.
Measures by the RBI
- Injecting the liquidity of Rs. 3.74 trillion: Responding to the market signal, the RBI rolled out a slew of measures from its armoury that will release liquidity of up to ₹3.74 trillion, or nearly 2% of gross domestic product, in the financial system.
- This will facilitate the market’s orderly functioning.
- Condition on LTRO-created-liquidity: In particular, the condition that the liquidity created through the Long Term Repo Operations (LTRO) tool must only be deployed in corporate debt securities was a direct response to the disruption in the markets seeing heavy sell-offs in the midst of thin trading volumes.
- Comparison with measures by the Fed.: The US Federal Reserve, which has launched an unconventional asset sales programme for $4 trillion, has announced it will also directly buy corporate bonds to ease the tight market.
- RBI has refrained from following suit, instead of passing the buck to banks via the conditional LTRO liquidity.
- Banks are unlikely to step in to ease the tight corporate securities market.
- Repo rate below the level seen in 2008: To combat the economic consequences of the Covid-19 pandemic, the MPC has dropped its policy interest rate by 75 basis points, taking it down to 4.4%, a multi-year low.
- The rate is now lower than it was in April 2009, when the central bank had taken it down to 75%, responding to the global financial crisis.
- In 2008, just four days ahead of a scheduled policy review, RBI had cut the policy repo rate by 1 percentage point, sending an extraordinarily strong signal.
How the challenge this time is different from the 2008 crisis?
- The nature of the current economic challenge is a lot different.
- Economy at standstill: The shock back then had depressed demand, but the economy had not been brought to a standstill as it has now, with resources, including labour and capacities idling.
Why the measures would not kickstart the economy
- Effect of rate cut: When all economic activity has halted, and uncertainty about the future is soaring, there’s no way a rate cut—no matter how steep—can kickstart the economy.
- Businesses cannot plan for the future and will not borrow.
- Banks will hold on too, fearful of the risk of loans going bad.
- As it is, even before Covid-19 struck, credit disbursement was sluggish.
- Now, with a host of companies facing the threat of credit rating downgrades, the probability of lenders turning a little less risk-averse is even lower.
- Who would be the beneficiary of the rate cut? The biggest beneficiary of RBI’s rate cut—which was bigger than market expectations—would be the government.
- Reduced borrowing cost for the government: In one stroke, the MPC has altered the fiscal deficit calculation by reducing the government’s borrowing cost.
- There will be savings on its outgo on interest payments for new and rollover borrowings.
Three-month moratorium and issue with it
- RBI also permitted banks and non-bank financial institutions to grant a three-month moratorium on loan repayments and reclassification of stressed loans as non-performing assets (NPAs).
- This will provide relief by cushioning cash flow pressures for firms and individuals when incomes and revenues have dropped sharply due to the lockdown.
- The forbearance on downgrading these loans will prevent a sharp spike in NPA levels for banks and NBFCs.
- There could be a sharp rise in the bad loans: The risk now is that a few quarters after the end of the moratorium there could be a sharp rise in bad loans.
- It could give rise to the NPA problem: In that sense, it amounts to kicking the problem of a potential spike in NPAs down the road.
- The problem of evergreening: On balance, it is the right call given the extraordinary challenge of the lockdown—provided a new cycle of evergreening of loans by banks is not allowed in a repeat of what happened in the aftermath of the global financial crisis.
Way forward
- What more could RBI have done? Special credit windows for the worst-hit sectors like aviation, hotels and tourism may soon be required.
Conclusion
While prioritising financial stability is fine, the MPC’s inflation projection is puzzling. While refraining from providing estimates on growth and inflation, given that the spread, intensity and duration of Covid-19 remain uncertain, RBI said it expects food price pressures to soften going ahead on account of a blow to demand during the lockdown. The projection seems unreasonable when there are unprecedented supply-side bottlenecks.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Mains level: Paper 2- Need for reforms in the administrative functioning of the Supreme Court.
Context
In the several cases with potential significance, there was no effective hearing at the interim stages which created fait accompli. And which results in the status quo cementing itself.
The Sabarimala case and ‘balance of convenience’ principle
- Review petition pending: Millions of disciples have protested the Court’s 2018 verdict where gender equality was held to trump the tenets of the faith and rejoiced at the November 2019 order of the Chief Justice’s bench granting their cause a fresh lease of life.
- As things stand, their review petitions are kept pending until the questions of law are determined.
- Please to enter the temple declined: In December 2019, fervent pleas on behalf of certain women devotees to enter the temple were declined, although the 2018 verdict continued to hold the field.
- Why declining the plea for entry matters? This was justified by the Court on a “balance of convenience”, thereby laying down a new principle for not directing the implementation of its own judgement.
Pendency of Article 370 challenge case hearing
- Nine judge bench: This year it was decided to put together the nine-judge bench to hear the cases on an urgent basis.
- Kashmir case on the backburner: But with two judges from the ongoing Kashmir/Article 370 challenges also a part of the Sabarimala case, it would mean that the Kashmir issues would be put on the back burner in the middle of its hearing.
- This is despite the advocates representing the right of women’s entry stating that they had no objection to the Kashmir cases being heard first.
- Then, barely a day into the hearing, a strain of swine flu reached some of the members of the Bench, leading to a postponement of hearings till the middle of March.
- Now, with a fierce pandemic enveloping the globe, the case is adjourned indefinitely.
Criticism of administrative functioning of the SC
- Over the last few months, the Supreme Court has been besieged by criticism of its administrative functioning.
- Delay in the hearing of important cases: Cases that have customarily been heard with alacrity, like those concerning personal liberty, law and order and criminal investigation, have been posted after long intervals with the Government being granted the luxury of time to respond.
- No effective hearing in cases with immediacy: Where immediacy is pre-eminent so that fait accompli may not be created, as with the validity of the Kashmir notifications, the CAA and the electoral bonds, there have been no effective hearings at the interim stage.
- Thus, the status quo slowly cements itself.
Reason for problems in administrative functions of the SC
- Dual role played by the CJI: Since the early years of the judiciary, one person has been given the onerous dual charge of heading both the administrative and judicial functions of the court.
- As a result, apart from sitting every day, reading briefs, hearing arguments and delivering detailed judgements, the Chief Justice has to also act as the final authority for all service-related matters of the Court’s 2,500 employees, issue office orders to streamline the registry.
- The CJI also supervise measures for security and infrastructure, chair committees, correspond with and entertain judicial delegations, attend symposia, delegate subject matters among colleagues, constitute benches of varying strengths and interview candidates for the various courts.
- In the old days, when the burden of cases was modest, these tasks would not have been challenging.
- But in the present time, not only are they overwhelming, but they also bring in their wake a host of attacks on the person who occupies that high office.
Need for the Chief Executive Officer in the SC
- Administrative functioning of the SC: In all the administrative tasks, the Chief Justice is assisted by a team of registrars, who are headed by the secretary-general.
- As they are junior judicial officers, they neither have the training nor the complete independence to take steps towards course correction.
- The requirement of CEO: This is why the Supreme Court sorely requires a chief executive officer – an independent professional who is equipped with the day-to-day management of the Court and is not beholden to the judges in any way.
- How it will help? The CEO will be charged with the entire mission of running the Court so that the judges can concentrate on what they are trained and experienced to do – adjudicate.
- Operational autonomy: The CEO will, of course, have to be given adequate operational autonomy and be answerable to a committee of the Court, comprising judges and bar representatives, thereby providing for a professional process, much like in the corporate sphere.
- With this, the judges will at least be spared the charges that they have had to withstand over the last few years.
Conclusion
It is only for politicians to concern themselves with public opinion, not for judges. They are weaponised by the Constitution to serve the cause of justice, and in this, as per Article 144, all civil and judicial authorities are enjoined to cooperate. Just a few blows of the gavel to any misadventures would be sufficient to send the message loud and clear: That the Court offers no sanctuary to the executive knaves.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not much.
Mains level: Paper 2- The lockdown hits the poor hardest and how it could have been avoided?
Context
Lockdown announcement has not been matched by national strategy — on containing fallout for poor.
Two arguments advanced against lockdown
- India’s decision to lock down was necessary. Two arguments are being advanced against it.
- The first argument: India is a poor economy, with millions at the margins of subsistence, who cannot bear the consequences of a lockdown. The density and living conditions in India make social distancing difficult in many cases.
- The second argument: It is that the extent of community transmission does not justify such drastic measures.
What are the justifications for the lockdown?
- The only hope: Precisely because millions in India are vulnerable and will not later have the possibilities of quarantining or medical care, the only hope we have of securing their lives is to slow down the spread of the virus as much as possible.
- And the only shot you have at it is when community transmission is possibly still at manageable levels.
- There is, therefore, a bit of bad faith in using the poor as the basis for expressing scepticism at the need for a lockdown. That is the most insidious form of privilege.
- The risks of any catastrophic spread will be even more incalculable for the poor.
Underscoring the importance of federalism and decentralisation
- States responding in innovative ways: One of the more encouraging things has been the way in which several state governments like Punjab, Odisha, Kerala, Delhi and others have come into their own, innovating under difficult circumstances.
- Role of panchayat and local officials: The much-neglected panchayat and local officials are key nodes in keeping track of possible cases and the creation of quarantining infrastructure.
- Role of frontline workers: It would also be churlish not to acknowledge the ways in which most of the frontline workers of the state are responding, learning and innovating in this situation.
- Federalism and decentralisation: If anything, this crisis is bringing home the importance of both federalism and decentralisation as central to a resilient governance architecture.
The preparation and follow-up of the lockdown
- But the national preparation and follow-up to take full advantage of the lockdown do not inspire full confidence.
- Lack of strategy: The announcement of the lockdown has not been matched by a commensurate national strategy.
- This is manifest, in the early signals on the following two important aspects:
- Containing the economic fallout for the poor.
- Building up the health infrastructure.
- It is, admittedly, early days; but the signs are not good.
Economic fallout for the poor
- Focus is not on the poor: In the entire framing of the problem, the poor have been at best an afterthought, at worst expendable damage.
- Steps taken not adequate: Steps like health insurance cover for frontline workers, increased food rations, are welcome steps. But a crisis of this magnitude required assurance to the most vulnerable that no stops will be pulled to secure their futures.
- Instead, what you got was incrementalism of the worst kind, masquerading as a big commitment.
- Low cash transfer: The cash transfers, in particular, through different schemes, are shockingly low.
- Need for the unprecedented social security support: This crisis is one of the rare instances where economists and even bankers, from across the political spectrum, have rallied around the intellectual argument for unprecedented levels of social security support.
- So the government’s “support by stealth” strategy is even more mystifying.
- Impact of lockdown on migrant labour: The magnitude of the crisis unleashed for migrant labour could have been avoided with a little forethought.
- What could have been done? Early announcement of cash transfers, shelter and food availability, would have obviated the need for migration.
Opacity on the health infrastructure side
- Issue of testing: Opacity is often a consequence of scarcity. And nowhere is this more manifest than in our discussion of testing.
- Underutilisation of capacity: Everyone understands that India has the scarce testing capacity, though it seems it is also under-utilising what it has.
- No clear testing strategy: The government is procuring more testing kits. But what is worrying is that there seems to be no publicly articulated statement of what exactly our testing strategy is, given the scarce resources.
- But there is still no sense of how we plan to put a testing strategy in place (not just numbers of tests, but where can they be optimally deployed), that will minimise the need for future lockdowns.
- What objectives is it trying to meet? There is more than a whiff of suspicion that there is a view that more testing might spread more panic.
- Or it might put more pressure on the health care system than it can handle.
- India has never understood that health expenditure is not an expenditure; it is an investment.
- Building up of health infrastructure: The success of the lockdown strategy is premised on an unprecedentedly vigorous building up of health infrastructure to fight the pandemic.
- There is a commitment by the Centre to infuse an extra Rs 15,000 crore in this sector. Some steps are being taken in building up capabilities, including ramping up production of ventilators and masks.
- Need for warlike mobilisation: This is an area where India needs almost a warlike mobilisation, to make sure we have enough testing, tracking, frontline workers, logistics and equipment in place to make sure that the duration of a lockdown is minimised or a repeat is not necessary.
- The creation of this kind of infrastructure will pay huge dividends even in non-pandemic times.
Conclusion
The prime minister is constantly asking the citizens to mobilise, and most of them respond. But it about time the state mobilises: On an economic stimulus that is truly meaningful and health infrastructure push that inspires confidence.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: PM’s National Relief Fund (PMNRF)
Mains level: Coronovirus outbreak and its mitigation
Keeping in view the novel coronavirus crisis across the country, various govt. employees, celebrities and political dignitaries are open-heartedly contributing to the PM’s National Relief Fund (PMNRF) to help combat the disease.
PM’s National Relief Fund (PMNRF)
- In pursuance of an appeal by the then PM, Pt. Nehru in January, 1948, the Prime Minister’s National Relief Fund (PMNRF) was established with public contributions.
- It was aimed to assist displaced persons from Pakistan.
- The resources of the PMNRF are now utilized primarily to render immediate relief to families of those killed in natural calamities like floods, cyclones and earthquakes, etc. and to the victims of the major accidents and riots.
- Assistance from PMNRF is also rendered, to partially defray the expenses for medical treatment like heart surgeries, kidney transplantation, cancer treatment and acid attack etc.
- The fund consists entirely of public contributions and does not get any budgetary support.
Legal status
- PMNRF has not been constituted by the Parliament.
- The fund is recognized as a Trust under the Income Tax Act and the same is managed by PM or multiple delegates for national causes.
Donations
- PMNRF accepts only voluntary donations by individuals and institutions.
- Contributions flowing out of budgetary sources of Government or from the balance sheets of the public sector undertakings are not accepted.
- Conditional contributions, where the donor specifically mentions that the amount is meant for a particular purpose, are not accepted in the Fund.
Its operation
- PMNRF operates from the Prime Minister’s Office and does not pay any license fee.
- PM is the Chairman of PMNRF and is assisted by Officers/ Staff on an honorary basis. Permanent Account Number of PMNRF is AACTP4637Q.
Tax exemptions
- PMNRF is exempt under the Income Tax Act, 1961 under Section 10 and 139 for return purposes.
- Contributions towards PMNRF are notified for 100% deduction from taxable income under section 80(G) of the Income Tax Act, 1961.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Not Much
Mains level: Ensuring food supplies amidst COVID-19 crisis
This is perhaps the first time ever that India is facing a national disaster or a war-like situation amidst plentiful supplies of food even as a bumper Rabi crop beckons.
Bumper yield in crisis
- Farmers are currently about to harvest —if they haven’t already.
- Given the surplus and extended monsoon rains, which helped recharge ground water and fill up reservoirs, superabundant produce is round the corner.
- This comes even as there is demand destruction from the shutting down of HORECA (hotels, restaurants and catering) and other institutional segment businesses following the nationwide lockdown.
- It raises the possibility of a crisis similar to the one three years ago that followed demonetization. But the scale, it is feared, could be bigger.
- The post-demonetization rabi crop, also a bumper one, was at least harvested and marketed even if it didn’t fetch a good price.
The real challenge
- The food and civil supplies departments in states will ultimately ensure that the terminal markets in these centres major cities receive their required daily flow of produce anyhow.
- The problem will be in the remote towns and the rural hinterlands that are serviced through upcountry APMCs.
- The grocers there are at the greatest risk of running out of stocks if the lockdown continues without inter-state movement restrictions in agricultural commodities being removed.
How to transport produce
- This time, there are doubts being raised even on that.
- The simple reason for it is: Will farmers, labourers and machines (combines, threshers and tractor trolleys) be able to move freely to harvest the produce and take it to the mandis?
- The UP government has issued a direction to all district administrations and law-enforcement authorities to exempt all services, including labour, that are involved in agricultural production, processing and marketing from the current lockdown provisions.
- Other states, too, may follow. But the question remains of the directives being implemented on the ground.
Will there be workers?
- At the second stage comes the mandis, where marketing of the crop would happen.
- Here again, there is a possibility of shortage of labour (the people who do unloading, cleaning, bagging and reloading of the grain that is auctioned or sold) and even gunny bags.
- Further, it would be necessary to prevent crowding, and maintain social distancing.
Possible alternatives
- One way out could be to allow entry only to a limited number of farmers, who may be issued SMS alerts informing them about the date and time to bring their crop.
- Each farmer can also be given a maximum quantity — say, one tractor-trolley load of 30-40 quintals — that may be brought in a single day.
- The permission for the next trolley load will be only after other farmers have got their turn to sell.
- All this will obviously delay the process of marketing, raising the prospect of panic sales.
- This could be avoided if the government were to give a clear-cut assurance — at least in respect of crop where there is MSP-based procurement — that it will continue buying till the last grain is offered.
Safer places than APMC
- Besides, the marketing of produce needn’t be limited to the APMC (agricultural produce market committee) mandi yard.
- Any flour or dal mill, and even primary school premises can be designated as an APMC marketing area.
- The objective should be to ensure that the farmer’s produce gets marketed without resulting in overcrowding.
Way forward
- The risk of shortages today is really not in the metros or state capitals.
- Once marketing is done, the crop has to move beyond the mandi.
- This is probably the right time to dismantle all inter-state and intra-state movement restrictions in farm produce.
- Free movement is necessary for the context of both a bumper crop and the ongoing lockdown.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Schedule H1 drugs
Mains level: Coronovirus outbreak and its mitigation
Hydroxychloroquine is now a schedule H1 drug and can be sold on prescription only.
What are Schedule H1 drugs?
- The sale of the Hydroxychloroquine drug from now on should be in accordance with the conditions for sale of drugs specified in Schedule H1 to the Drugs and Cosmetics Rules, 1945.
- In exercise of the powers conferred by Section 26B of the Drugs and Cosmetics Act, 1940 (23 of 1940), the Central Government can direct that sale by retail of any drug.
Why such move?
- The Central Government is satisfied that the drug ‘Hydroxychloroquine’ is essential to meet the requirements of emergency arising due to pandemic COVID-19.
- And in the public interest, it is necessary to regulate and restrict the sale and distribution of the drug ‘Hydroxychloroquine’ and preparation based thereon for preventing their misuse.
Hydroxychloroquine
- Hydroxychloroquine is used to prevent or treat malaria infections caused by mosquito bites.
- It does not work against certain types of malaria (chloroquine-resistant).
Pls take a note-
- Hydroxychloroquine and a related drug, chloroquine, are currently under study as possible treatments for COVID-19.
- These drugs have not yet been approved for this use.
- Do not use these medications to treat COVID-19 unless your doctor recommends that you do so.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now
Note4Students
From UPSC perspective, the following things are important :
Prelims level: Indian Scientists’ Response to CoViD-19 (ISRC)
Mains level: Not Much
Several Indian scientists have come together to form a Google group to address some of the concerns that the COVID-19 outbreak has thrown up.
Indian Scientists’ Response to CoViD-19 (ISRC)
- It is a voluntary group of scientists who regularly discuss the rapidly evolving situation with its dire need for science communication.
- With nearly 200 members, the group has scientists from institutions such as the NCBS, the IISc, the TIFR, the IITs, the IISERs and many others.
- The group aims to study existing and available data to bring out analyses that will support the Central, State and local governments in carrying out their tasks.
Self-assigned tasks
- Several working groups have been formed by scientists.
- They include one on hoax busting to address disinformation spreading with respect to the coronavirus and one on science popularization to develop material that explains concepts such as home quarantine.
- Other groups work on resources in Indian languages, mathematical models and apps.
Why such a group?
- The scientific community has realized their social and democratic responsibility in the current situation, both in terms of analysing the situation and reaching out to the public.
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
Attend Now